By Heather Shoning
Ensuring your investments and assets will carry you into A COMFORTABLE RETIREMENT
Photos By Shutterstock.com/ song about summer
Many people really nerd out on financial planning and investing, but if you’re not one of them, don’t worry. We’ve got some easy steps you can follow to ensure you’re on the right track, measuring what’s important and taking actions that will set you up for a worry-free retirement.
We, of course, can learn from those with healthy financial lives to understand what’s essential and what the key indicators of economic security are so we can see what we’re doing right and where there’s opportunity for growth. Possibly, one of the most important considerations is having proper guidance. Warren Buffet wisely said, “Risk comes from not knowing what you’re doing.” Wealthy individuals and couples typically have access to a team of financial advisors, including investment professionals, tax experts and estate planners, to help them make informed decisions and optimize their financial strategies while minimizing risk. This is not something you’re meant to manage all on your own.
“In simple terms, this is an individual or couple who has a strong balance sheet (right balance of liquid, semi-liquid, retirement, personal and non-liquid assets), a strong cash flow (easily lives under means), a strong portfolio of working assets (stocks, bonds, businesses, real estate—beyond personal homes—and alternatives), and if still working, a strong growing career one loves and is appropriately rewarded in economic and non-economic ways,” explains. Joseph Janiczek, CEO and Founder of Janiczek Wealth Management in Denver that serves high- and ultra-high-net-worth individuals and families.
Of these four main categories that determine financial security, he goes on to say that it’s crucial to be sure all four are optimized during working and wealth-creation years and that at least three can easily handle abnormal economic scenarios during retirement. For instance, you want to test your desired spending level at the top 10 percent and bottom 10 percent of market conditions to ensure it’s not based solely on good economic conditions. Also, you want to be sure your retirement savings can handle a top-heavy spending situation in the event of unexpected expenses.
One thing some people don’t always consider as part of a financial security plan is creditworthiness and access to credit. Although maintaining a low level of debt relative to overall net worth is important, having the means to leverage debt and use it for wealth-building opportunities when that makes sense is helpful. Even though you may have the means to pay in cash, it can be beneficial to use credit wisely.
Having cash to use as needed means having a portion of wealth in liquid assets, as Janiczek mentioned, allowing for quick access to funds in case of emergencies or for investment opportunities. Cash reserves or easily convertible assets contribute to liquidity.
In addition, having a well-diversified investment portfolio with a mix of stocks, bonds, real estate and other assets allows you to spread out your risk—in other words, minimize it—and maximize your returns. Global investments take advantage of opportunities in different markets and reduce risks associated with regional economic fluctuations. Additionally, multiple and stable income streams, such as your investments plus business ventures and passive income, contribute to financial security.
Of course, the goal is to build net worth—the total value of your assets minus your liabilities. A high and growing net worth is a crucial indicator of financial security. But how do you know if you’re on track? Janiczek Wealth Management—which has been on the Barron’s Top 1200 U.S. Financial Advisors list ten years running, among many other accolades—says identifying the key performance indicators and then having a report with detailed information showing what areas are strong, weak, vulnerable and require immediate action is an excellent first step. The company offers a proprietary system to do just this for its clients. Next, the Janiczek team says monitoring your numbers monthly and quarterly for anomalies or changes in circumstances that may require a course correction or specific action to maximize an opportunity is a good cadence for being vigilant of your financial security. “This all can be done with minimal time if the right systems, expertise and support are in place,” Janiczek says.
What do you do when you’ve built a significant level of wealth? It’s the perfect time—if you haven’t already done it—to engage in comprehensive estate planning to protect and transfer assets efficiently to the next generation. This may involve the use of trusts, wills and other legal structures. In addition, you may want to engage in philanthropy and social responsibility initiatives that are important to you. Having the financial means to do so can positively impact society.
Beyond financial metrics, a high quality of life, including access to education, health care, travel and leisure activities, is an essential indicator of financial security and happiness. “Since money is a means to an end, and not an end, we focus on having money serve the client, not vice versa,” Janiczek says. “You balance short- and long-term by aligning wealth to short- and long-term needs, ambitions and opportunities.”
Janiczek Wealth Management
7001 E. Belleview Ave., Ste. 600
Denver
303.721.7000